Hollywood has reportedly received a whopping $25 billion in state tax incentives to date — a win for studios like Disney and Netflix but a big “L” for ordinary taxpayers, who are footing the bill for the giveaways.
Frequently championed by Democrats, state tax credits for movie and TV productions are intended to juice local economies by creating jobs and boosting revenue for small businesses that provide services like catering and transportation. That, in turn, is supposed to generate more tax dollars.
But despite the $25 billion spent so far, states are seeing paltry returns on their investment — sometimes less than 20 cents on each dollar given away, according to studies cited in a New York Times report.
A recent report prepared for state auditors in Georgia estimated that the tax revenue returned on each dollar spent on incentives was 19 cents. A similar report from New York determined the return was between 15 cents and 31 cents.
Sometimes, the losses are far worse, the Times reported.
When Michigan offered tax incentives to Hollywood, the Detroit suburb of Allen Park sold $31 million in bonds to turn a site that had once been occupied by an auto parts manufacturer into a movie studio that it hoped would employ thousands. But the project fell apart in 2010, and the city was forced to slash the pay of its police officers and firefighters to pay for the fiasco.
“The city got taken advantage of,” Sgt. Grant Peace, a firefighter who took a 10 pay cut, told the Times. “And it hurt our pocketbooks.”
Michigan stopped offering the giveaways about a decade ago after a state economist determined that “the film incentives represent lost revenue” and that their economic benefits were “negligible.”
But that isn’t stopping some Michigan Democrats from trying to revive the Hollywood boondoggle.
“We’re not on an even playing field,” state senator Dayna Polehanki (D) told the Times. She is one of the sponsors of legislation that would bring back Michigan’s incentive program, though in a form that Democrats say will be more fiscally responsible.
But there’s still plenty of skepticism about the efficacy of such programs.
“You could find almost an unlimited number of better uses for the same dollars,” Michael Thom, a tax expert at the University of Southern California, told the Times. “Who on earth would say, ‘Keep giving the money to Hollywood; my kid’s school doesn’t need new books’?”
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